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Morning markets: Turnaround Tuesday aims at crop rally

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What better day than a Tuesday for a bit of a rethink in the Chicago story? If only a small rethink.

The second day of the week has a habit of turning around strong trends seen on the first.

And

soybeans

, gasp, eased in early deals, edging lower from a seven-month, but realising long-held forecasts that, with non-commercial investors holding a huge net long in the oilseed, there looked limited scope for further buying from this area.

The May lot fell 0.25 cents to $14.20 ¾ a bushel as of 09:10 GMT.

"Funds are record long, thus we could see more two sided trade soon," Mike Mawdsley at Market 1 said.

Slower sowings

Very early on, even the new crop November soybean lot - which has been sent soaring by the need to compete with corn for acres in US farmers' sowing plans – lost ground.

Indeed, there was some incentive to sell from data last night, when the US Department of Agriculture released its first Crop Progress report of 2012, updating on the health and sowings pace for major crops.

Soybeans in fact didn't get a mention. But what the report did show is that

corn

, the oilseed's main competitor in farmers' planting programmes, had not got off to quite the flying start that the market had believed.

Investors were expecting the data to show US corn sowings 5-7% completed, speeded by benign weather. The actual rate was 3%, only 1 point above the average pace.

A lowly rate of corn in the ground means farmers have more scope for switching from corn to soybeans, a move which has been increasingly incentivised by futures markets.

'Switching of corn to soybeans'

In fact, there is already talk that growers are changing crops.

"We have already heard of some switching of corn to beans because of the change in price," Mike Mawdsley at Market 1 said.

Still, the December corn lot fell back from early outperformance over November soybeans to fall 0.2% to $5.43 ¾ a bushel.

The November soybean lot recovered to $13.85 ¼ a bushel, unchanged on the day.

The soybean: corn ratio reached 2.54.

And some believe the ratio still has further to run. Goldman Sachs, for instance, on Monday predicted it will reach 2.72, a level not seen since spring 2010.

Corn vs wheat

Still, there was some evidence of unwinding of spreads sticking in the old crop lots, where a "long soybeans, short corn" bet has been popular.

On Tuesday as May soybeans eased, May corn added 0.2% to $6.56 ¼ a bushel.

But there was no respite for Chicago wheat, after the Crop Progress report showed the condition of the US winter wheat crop continuing to improve.

The crop was rated at 58% in "good" or "excellent" condition, at the bottom end of investor expectations, but still well ahead of the 37% a year ago.

Chicago wheat for May fell 0.7% to $6.52 ½ a bushel. And, this time, Minneapolis spring wheat eased too, shedding 0.2% to $8.47 ½ a bushel for May.

Spring wheat seedings were, at 8% completed, well ahead of the average pace, the Crop Progress briefing showed.

One-year top

Still, some other agricultural commodities got off to a better start, on what was generally a bit of a risk-on day for financial markets, with the

dollar

easing and most Asian share markets making ground.

Cotton

added 0.3% to 93.41 cents a pound in New York, for May delivery, despite mixed data overnight from the International Cotton Advisory Committee.

The ICAC cut its estimate for the world 2012-13 cotton harvest by 265,000 tonnes, but reduced its forecast for consumption by even more.

In Kuala Lumpur,

palm oil

rose to a fresh 12-month high as it factored in the gains that soybeans, source of rival vegetable oil soyoil, made in the last session.

Kuala Lumpur's benchmark June contract hit 3,556 ringgit a tonne in early deals before easing to 3,556 ringgit a tonne, up 0.7% on the day.

By Agrimoney.com

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